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Ex-IRS chief: No AMT patch and tax season will be in 'chaos'

Doug Shulman, the former IRS commissioner, said the IRS and the 2012 tax filing season will be thrown into “chaos” if lawmakers do not fix the so-called alternative minimum tax by the end of the year.

“If those aren’t fixed, it’s going to be real chaos with the American people trying to interact with the IRS,” Shulman said at POLITICO Pro’s P2012 Policy and Politics Tax Luncheon. “People won’t get refunds.”

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The last AMT patch actually expired Dec. 31, 2011. The tax is intended to ensure people above a certain income thresholds pay a minimum amount each year to Uncle Sam, but it was never indexed for inflation.

Without the quick fix, Shulman said more than 30 million people will see their taxes skyrocket. Some, he said, are “going to have a new bill of $5,000-$6,000.”

The IRS has already programmed its software to include a patch for the alternative minimum tax, but that’s based on an assumption that lawmakers will actually pass the patch. Without it, Shulman said, tax filing will be severely delayed for those who are subject to the tax.

“Most of those people are not going to be able to file around March,” he said, and most American usually file as early as January.

The Congressional Budget Office estimated it will cost taxpayers $103 billion in 2013 and $864 billion dollars over 10 years.

This article first appeared on POLITICO Pro at 1:15 p.m. on December 10, 2012.

Any Idea why Google supported Obama? could this be payola - from Chicago?

Michael Turek

Front Street in Hamilton, Bermuda. The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary, could fuel the outrage over corporate tax dodging.

Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.

By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011.

The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.

Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels. ‘Deep Embarrassment’

“The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe,” said Richard Murphy, an accountant and director of Tax Research LLP in Norfolk, England. “The political awareness now being created in the U.K., and to a lesser degree elsewhere in Europe, is: It’s us or them. People understand that if Google doesn’t pay, somebody else has to pay or services get cut.”

Google said it complies with all tax rules, and its investment in various European countries helps their economies. In the U.K., “we also employ over 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London,” the Mountain View, California-based company said in a statement.

The Internet search giant has avoided billions of dollars in income taxes around the world using a pair of tax shelter strategies known as the Double Irish and Dutch Sandwich, Bloomberg News reported in 2010. The tactics, permitted under tax law in the U.S. and elsewhere, move royalty payments from subsidiaries in Ireland and the Netherlands to a Bermuda unit headquartered in a local law firm.

Last year, Google reported a tax rate of just 3.2 percent on the profit it said was earned overseas, even as most of its foreign sales were in European countries with corporate income tax rates ranging from 26 percent to 34 percent. Foreign Taxes

Any Idea why Google supported Obama? could this be payola - from Chicago?

Michael Turek

Front Street in Hamilton, Bermuda. The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary, could fuel the outrage over corporate tax dodging.

Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.

By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011.

The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.

Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels. ‘Deep Embarrassment’

“The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe,” said Richard Murphy, an accountant and director of Tax Research LLP in Norfolk, England. “The political awareness now being created in the U.K., and to a lesser degree elsewhere in Europe, is: It’s us or them. People understand that if Google doesn’t pay, somebody else has to pay or services get cut.”

Google said it complies with all tax rules, and its investment in various European countries helps their economies. In the U.K., “we also employ over 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London,” the Mountain View, California-based company said in a statement.

The Internet search giant has avoided billions of dollars in income taxes around the world using a pair of tax shelter strategies known as the Double Irish and Dutch Sandwich, Bloomberg News reported in 2010. The tactics, permitted under tax law in the U.S. and elsewhere, move royalty payments from subsidiaries in Ireland and the Netherlands to a Bermuda unit headquartered in a local law firm.

Last year, Google reported a tax rate of just 3.2 percent on the profit it said was earned overseas, even as most of its foreign sales were in European countries with corporate income tax rates ranging from 26 percent to 34 percent. Foreign Taxes

Look what happens when the government decides that the rich need to pay their fair share. It is like doo doo that rolls downhill to the real middle class not the above 205000 middle class. God save us from our own government.

Without a patch, the AMT would affect about 29 million taxpayers that otherwise wouldn't be affected. It might be beneficial if people are affected by the tax and their refunds delayed, even if only temporarily. Perhaps that will help educate them of the need for reform of the entire IRS tax code and the AMT tax.

If the Bush tax cuts expire, the alternative minimum tax exemption amounts for 2012 (if left unpatched) are scheduled to revert to the following levels: $33,750 for single and head of household filers, $45,000 for married people filing jointly and for qualifying widows or widowers, and $22,500 for married people filing separately.